Chesterfield County Public Schools Supplemental Retirement Plan

Transcription

1 Chesterfield County Public Schools Supplemental Retirement Plan PRESENTATION TO THE BOARD OF SUPERVISORS APRIL 26,

2 Agenda Approach to Plan Review Plan Financials Key Elements of the Plan Plan Management Aspects Questions 2

3 Employee and Financial Considerations Shaped the Plan Review and understanding of the existing plan and the proposed school committee plan Respect for the decisions of employees choosing Chesterfield Schools Protect the benefits of those in their SRP working year or retired and receiving payouts under the plan Adherence to fiscal stewardship and responsibility Reasonable cost of benefit Liability reduction Improved funded status of the trust Protection of the Triple AAA credit ratings Approach to Plan Review 3

4 Credit Ratings are Multidimensional, Yield Various Benefits A Summary Primer on a Credit Rating Beneficial aspects of a high credit rating A testament to having an environment conducive to growing business investment A testament to the strength of management s capabilities Provides an issuer access to capital at the lowest cost of funds Ratings reflect the relative strength of a variety of characteristics Economy and tax base (30%) Finances (30%) Management (20%) Debt/Pensions (20%) Represent an independent third party validation of environment Characteristics and relative importance sourced from Moody s Investor Services Plan Financials 4

5 Rating Agency s Focus on Pensions - Liability and Ability to Pay Pensions and Rating Criteria: Pensions comprise 10% of Moody s weighted rating scorecard Moody s focus is on Adjusted Net Pension Liability Adjusted Net Pension Liability evaluated relative to: An entity s tax base An entity s operations Other equally important criteria: Value of tax base Fund balance (as a percentage of operating revenues) Plan Financials 5

6 Management Practices Even More Important Recent independent research/ commentary: The rigor of a government s financial management practices is an important factor in Standard & Poor s analysis of that governments creditworthiness. Standard & Poor s, U.S. Local Governments General Obligation Ratings: Methodology and Assumptions, September 12, we have considered consistent adherence to a prudent actuarially determined pension funding plan as an indicator of sound budget management practices. Moody s Investors Service, US Local Government General Obligation Debt, January 15, 2014 Past Pension Costs to Compete for Future Resources of Many US State and Local Governments Moody s Investors Service November 9, 2015 Plan Financials 6

7 Rating Agencies Recognize Chesterfield s Strong Management Practices Rating agency commentary from Chesterfield credit reports: Fitch Ratings - June, 2016 credit report: The AAA IDR and GO rating reflects the county s robust financial management, as demonstrated by the solid maintenance of reserves, low debt and pension liabilities. The county s strong revenue and expenditure flexibility support Fitch s expectation for resilient operations going forward. Moody s Investors Service - June, 2016 credit report: Continued careful financial management and commitment to maintaining sound financial flexibility are expected to support Chesterfield's strong fiscal operations. Plan Financials 7

8 Proposed Plan Best Positioned for Longer Viability - Plan financials focus on reduction in unfunded liability and improvement in funded ratio - Funded ratio is a point-in time measure of a plan s financial health - 80% funded ratio an industry standard of a well funded plan School SRP Participating School SRP Eligible Total Liability Total Cash Reserved Net Unfunded Liability Funded Ratio 2018 Funded Ratio at 80% $49.2 million $38.9 million (32.2% decrease) $88.1 million (17.4% decrease) $21.4 million $66.7 million (21.7% decrease) 24.3% (21.0% increase) 2027 (Current Plan was n/a) Plan Financials 8

9 Proposed Plan Reduces Annual Costs Lower unfunded liabilities result in lower contribution levels Proposal has lower projected contribution levels than CCPS plan Savings total $14.2M over 12 years Creates flexibility/ capacity for other priorities $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Estimated Annual Savings FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 Plan Financials 9

10 Plan Design Highlights of the Plan design consist of: Value of benefit equals 175% of final annual compensation Benefit paid out over a seven year period 175 maximum entrants per year with seniority to access plan based on age Maximum salary on which the benefit is calculated is $95,000 Service requirement of 20 years with Chesterfield Schools and with VRS, except those employees 65 or older, 15/20 years Age requirement of 55 (pre-2010 employment), 60 years post-2010 employment Key Elements of the Plan 10

11 Plan Governance and Enhanced Transparency Formation of a joint county-school Administrative Committee Primarily financially oriented responsibilities Membership County: Deputy County Administrator and Finance Director Schools: Asst. Superintendent of Finance, Director of Compensation & Benefits, and Atlarge Enhanced reporting to elected bodies and appointed committee Uses Internal Audit, external auditors, and Audit & Finance Committee Annual, and as needed reporting requirements on Plan finances Amendment to Financial Policies Specifies payments on Defined Benefit Plans Plan Management Aspects 11

12 Governance Embedded in Board Policy Financial Policy Amendment (presented for consideration via companion item): Payments for Defined Pension Benefits - The County is committed to making annual payments to an established trust in an amount that is the greater of a) the actuarially determined contribution or b) the expected benefit payments, to sustain funding levels associated with defined pension benefits offered by the employer. Initial payments to the respective trusts will be made annually prior to September 1 and any additional contributions, if needed, would occur prior to year-end and be paid from appropriated amounts or other sources targeted for trust deposits. Companion Appropriations Resolution grants County Administrator authority to make necessary payments. Plan Management Aspects 12

13 Chesterfield County Public Schools Supplemental Retirement Plan Questions 13